Iraq’s slide towards civil war has rattled global markets and driven a spike in oil prices, after United States President
Barack Obama
said he was not ruling out any possible actions to halt the march of Islamist insurgents.

Overshadowing a White House meeting with Australian Prime Minister Tony Abbott, Mr Obama told a war-weary America there will have to be a short-term military reaction, as well as a diplomatic push, to contain Sunni insurgents.

“I don’t rule out anything because we do have a stake in making sure that these jihadists are not getting a permanent foothold in either Iraq or Syria, for that matter,’’ US President Barack Obama says.
Photo: AP

The comments came as Iraq’s Shia-dominated government launched air strikes against rebels who have taken hold of the city of Mosul as they push towards Baghdad.

“I don’t rule out anything because we do have a stake in making sure that these jihadists are not getting a permanent foothold in either Iraq or Syria, for that matter,’’ he said.

“There will be some short-term, immediate things that will need to be done militarily and our national security team is looking at all the options, but this should be also a wake-up call for the Iraqi government that there has to be a political component to this."

US benchmark West Texas Intermediate for delivery in July jumped $US2.13 compared to Wednesday’s close, rising to $US106.53 a barrel, its highest level since September 18, 2013. European benchmark Brent crude for July delivery rallied $US3.07 to $US113.02 a barrel.

Sunni Islamist rebels, who took over Iraq’s second-biggest city Mosul earlier this week, on Thursday surrounded the country’s largest refinery in the northern town of Baiji and extended their advance south toward Baghdad.

To the North, Kurdish troops seized the oil city of Kirkuk.

Threat to Iraq oil exports feared

Oil prices jumped to the highest level this year on growing concerns that escalating violence in Iraq could disrupt oil supplies from the second-largest OPEC producer.

“The fear is that will cause a threat to Iraqi oil exports," Jefferies Bache trader Christopher Bellew said. “If this conflict knocked out Iraq as an exporter, that would have significant impact on prices."

US State Department spokeswoman Jen Psaki followed Obama’s comments by telling a daily briefing that the administration was considering all options, except for sending US troops into Iraq.

Speaking alongside Mr Abbott, Mr Obama also addressed long-term stability in the region, saying America needs partners in the Middle-East and Africa who can do some of the heavy lifting in the region, rather than rely on the US all the time.

“We are not going to be able to be everywhere all the time. But what we can do is to ensure that we are consistently helping to finance, train [a] military force with a partner country, including Iraq,’’ he said.

“That is a long and laborious process but we need to get started,’’ he said. “In the short term, we have to deal with what is clearly an emergency situation in Iraq.’’